Do the troika have his family as hostages?

"It is not necessary to have hope in order to persevere."

From the zero hedge article referenced by Talos:

It is Greece's decision to default or not, NOT the ECB's or EU's

I continue to be confused by the fact that most people talk about the issue from the lender's perspective.  "Should Greece be allowed to default?" "Does it teach Greece a bad lesson if they let them walk away? "  "Won't Greece just default again if the ECB lets them walk away?"

The reality is the IMF, or ECB, or EU can offer money to Greece, but it is Greece's decision to borrow more to pay off old debts.  Only Greece can decide to make payments and not default or demand restructuring.  Other entities or countries can make it easier for Greece to kick the can down the road, but in the end, only Greece can decide whether or not to pay its bills.

The people of Greece seem to prefer default.  It is fairly clear that this is not a short term liquidity problem, but a longer term solvency problem for Greece.  Greece has some assets it can sell, but as I have said time and again, they will still have those assets to secure new funds after a default/restructuring.  I continue to believe it is in the best interest of Greece to default and it is their decision, no one else's.  It may be bad for the rest of Europe if Greece defaults, but that really should not be the priority of the Greek government.

If Greece defaults, the creditors can then take steps to enforce their rights.  If a person fails to pay on their mortgage, the banks can enact their rights to foreclose.  If a U.S. company fails to pay its debt, creditors will suit, and the company and debtors will typically resolve the issue in the courts under Chapter 11 or Chapter 7.  There are similar statutes for corporate defaults in other countries.  The real reason that we are hearing so much about this from the lenders perspective, rather than the borrowers, is because it is not very clear what the lenders' rights are if Greece stops paying.

If Greece stops paying, the lenders cannot 'foreclose' on it.  There is no law that dictates how to proceed like chapter 11 does.  The bonds have very few if any covenants.  The lawsuits would have to be won in Greek courts and then enforced by people employed by the Greek government.  Good luck with that. (Emphasis added)

I continue to be confused by the fact that most people talk about the issue from the lender's perspective.

 
I doubt he is confused. The MSM is owned by those who have exposure and many other potential observers work for those who service those who have exposure. The issue is being framed from the lender's perspective and they hope not many will notice. The "confusion" is rhetorical.

"It is not necessary to have hope in order to persevere."

Just to answer myself...

The problem with a tax strike is that our EU masters might respond with confiscatory property taxes over the middle classes (which are essentially impossible to dodge). What about a tax over your home of 5% its value, to pay yearly?

Before you suggest this is impossible, I would like to remind that the Portuguese rape already does include measures in this direction. Don't believe me? Go read the agreement. Agreement between the Portuguese government and the EU-ECB-IMF which by the way has no version in Portuguese (only a summary).

Of course, if it comes to that, than open revolt will probably ensue.

"Tax strike" is the problem, not the solution. It is what the small and large business and the professionals are doing all the time in Greece. They do it since this country exists and they did it with renewed vigor and modern tools more recently (they used offshore companies, triangle invoicing and whatever money laundering tools you can imagine). The previous conservative government helped tax evasion to take off - it was a basic promise of the 2004 election - and the same party is now telling these people that when they come back to power they will give tax amnesty for one year and money laundering tools forever (for example they said that you wont have to explain where did you find the money to buy residential property).

The idea of a "tax strike" is quite neo-liberal. It reminds me of Ronald Reagan, G.W. Bush and Sarah Palin more recently.

In Greece, tax collection is very low. Direct taxes are just below 5% of GDP in Greece while they are close to 10% in the EU. Tax rates are similar. So there is a lot of tax-evasion, or 'tax strike' if you prefer to call it. Multiply the missing 5% by 6 or 5 years and you can find out that public debt has financed the tax evasion of the professional and small and large business. Now the private sector employees are called to pay the bill.

Actually the idea of outsourcing part of the tax collection system is not that bad. If the Troika is as good as it claims, let them prove that they can crack down tax evasion of the professional and the businesses. But they should put their money at stake, not ours.

"Eurozone leaders have turned a €50bn Greek solvency problem into a €1,000bn existential crisis for the European Union." David Miliband

If the announced plans for EU and/or ECB tax collectors to start working in Greece come to pass, I have to wonder about their personal safety as well as the personal safety of every MP who voted for the measures. I am also wondering how long it will be before the Greek conservative party starts claiming Greece was stabbed in the back by the Socialists, (not without some justification!)

It will be interesting to see the ECB attempting to organize Greek police to protect their tax collectors. Even more interesting to see the ECB attempt to organize foreign police or military to protect their tax collectors. Everyone involved in this is mad. The only positive that could come out of it is were the ECB and EU to see that the taxes on the wealthy in Greece are collected from their foreign assets, but that is the action most likely to set off violence.

"It is not necessary to have hope in order to persevere."

Yes, this is a likely effect. I think all European countries has some form of rural policy to avoid depopulation of the countryside, farm subsidies if nothing else. And the EU has funds for the development of certain areas.

However, ECB has the reversed policy: stripmine the periphery. If sustained an increased migration to the core is the effect.

Then what chips might fall? As high unemployment policy is in place, an increased competition for jobs in the core brings down wages and feeds resentment. On the national level ugly parties gains, while on the local level the left-of-pes parties can make use fo the migrants right to vote in local elections. So a more polarised and confrontational politics.

And in the periphery? Those that can't or won't leave left with a stripmined state and everything owned by foreigners? If no political solution can be formed, I think that is fertile ground for violent movements of different stripes and colors.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

cagatacos:

The way the system is devised cannot sustain massive emigration of the productive workforce: there will be no one left to rape.

i wish i could draw a cartoon of europe pointing a gun to her head, with central bank policy written on the barrel.

banks + power = TBTF = quick profiteering => war and ruin...

resource limitation is the only conceivable brake on this going on for ever, and it stands to get worse before it can get better, too many lawyers and armies round the bones.

sons go the wars, daughters to the manor, twas ever thus; sometimes the tables turn, before turning back again.

perhaps... they will stay turned one day. it will take a hitherto unimaginable level of intention, cohesion, collaboration and eventually, irresistible clout before these jokers get the memo. they are amply overpaid not to, and 'anything but' goes.


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

By the way, this would be fun to see in Portugal.

Here, the strategy of the right (and partially of the socialists) has been essentially to support business tax-evasion (as opposed to wage slave tax evasion - impossible in that case).

Proper tax collection (towards business) is anathema to the right here. It would be curious, to say the least, to see the dynamics of a EU mandate on proper tax collection towards business.

On the contrary, sold off assets are precisely as easy to recover as surrendered labour rights. Arguably easier.

See, e.g., the Sakhalin gas field.

- Jake

Friends come and go. Enemies accumulate.

DoDo:

international involvement in tax collection

This is insane squared. What is this supposed to mean in practice? Foreign tax collectors, foreign tax evader detectives, foreign tax authority bureaucrats?

but hasn't this always been the rear end of the euro common currency horse? wasn't it inevitable that eventually we'd have to have that? seems unrealistic to expect otherwise...

point being who leads the superstate, we've had the candy of convenience (the E) and the flowers of freedom (schengen), now comes the quid pro quo.

if we do it wrong, it's date rape, if we do it right it may be a lot fairer and efficient than what the PIGs are humilated by now.

standing in a line at a bank here in italy, i once heard a 'statale' (civil servant, taxed directly at paycheck), ranting how the folks like him are having to shoulder the burden of financing the state, while furriers sport in yachts declaring losses. it was interesting how everyone else in the line suddenly found their own shoes fascinating objects of contemplation. you could have cut the vibe with a knife, and the 'great divide' was in naked view.

italy is a poster child for this syndrome, and it creates huge friction and inefficiency. for example if an architect comes in to the comune with a building plan, he is treated like a shyster, immediately suspected of under-reporting profits or doing cash deals, and the only revenge they can take is by becoming as constipatedly recalcitrant as they can, that'll teach 'em... bureaucrats' revenge.

aaagh, it really gums up the works something ghastly.

if euro-wide fiscal centralisation were employed enough to reduce the under-the-table economy by even a third, (especially the organised crime element), italy would be a wealthy country, as i suspect would spain, portugal and greece. it would cut out a lot of grifter middlemen, and one suspects the whole shebang would be run better and more equitably from brussels than rome.

this would be controversial, to put it mildly, the UK may entirely peel off, but their dowry has so much funny money in it anyway. it goes against the regionalist movement that's gaining power here big time, but the ones who'd squeal the loudest would be the ones who have the most to lose from europeans all being taxed fairly and efficiently anyway, making the job of closing them easier.

many here affirm the main reason for berlu's voterbase popularity is his own aversion to paying taxes.

i would imagine the strongest objections to euro-wide fiscal network will come from the dutch not wanting the germans or the french or vice versa not being privy to each others' moneygames, not from the PIG countries, but i'm guessing here. i wonder if there any reputable polls about the eurovolk's feelings about this.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

Wolfgang Münchau on the IMF

In his FT column, Wolfgang Münchau says the disagreement between the IMF and the EU over the future funding policy for Greece has one good aspect. It ends the illusion of half-hearted soft options like reprofiling, or soft restructuring. We either have to roll over - and keep on doing so - or choose a hard default. The latter would almost invariably lead to a Greek exit from the eurozone. He expects the European Council  to reach a decision to roll over at the June summit , which would be just in time for the IMF to release the next tranche of the existing loan. For the time being, the name of the game is to keep the Germans and the Dutch calms, the True Finns out, and the Greeks in.

Economics is politics by other means

It could be yet more of a weird kabuki dance. They are trying to push Greece as much as possible to break and be done with it. This would explain the bizarre new plans. The European media has done a rather poor job of sticking to the details. It has been reporting all manner of inaccuracies about Greece's austerity package and what it entails. Greece signed on originally to sell $7 billion in assets by 2015, and now each step of the way, we hear Greece is not complying with their austerity package. The changes have come repeatedly. Greece must sell 15 billion by 2012. Agreed. Greece must sell 50 billion by 2015. Agreed. Greece must sell a lot more than that (Ollie Rehn). Greece must sell 300 billion (Stark). Greece must establish a fund controlled by non-Greeks. Greece must give over assets as collateral. Greece must have an external tax collections agent. After Greece agrees to all of this, one wonders what is next?

Why is nobody considering the possibility of issuing a local-currency/scrip/"greenbacks" without formally exiting the Eurozone?

Greece could, over a weekend, instruct its banks to set up accounts in ND while retaining existing Euro accounts. ND would start out at the exchange rate with the Euro on January 1, 1999, but float thereafter. ND notes could be printed. Both Euros and ND would remain legal tender in Greece. The government would announce that it would redenominate all its domestic obligations to ND at the initial exchange rate. Capital controls (tax on outflows, and border controls) would be instituted to retain the greece economy's existing Euro reserves as a backing for the ND.

Because of Gresham's law, ND would circulate extremely fast compared to Euro cash, which would be hoarded. In fact, were Germany do attempt to issue New-DM, the New-DM would be the one that would not circulate, being perceived as more valuable than the Euro by the German public. Gresham's law is funny that way.

The least disruptive wa yout of the European currency crisis is for deficit countries to issue local currency à la Wörgl without formally exiting the Euro, and to institute capital controls. After all, France and Denmark have already temporarily suspended Schengen so what's the big deal with temporarily taxing capital flows?

Economics is politics by other means

Why doesn't Greece just default and let others try to kick it out of the EMU. And meanwhile, start a state bank, backed with all of the assets the ECB is demanding they "privatize", and issue local currency, commission public works, make loans for farmers and businesses which will make domestic consumables, etc. paid in the local currency. By requiring tourists to make payments in local currency they would get "hard" currency. They then should institute protective tariffs for domestic agriculture and industry -- The American System, a la Henry Carey's Harmony of Interests political economy.

"It is not necessary to have hope in order to persevere."

It doesn't look like the endgame is rational for the overlords.

Best said in Bob the Angry Flower's Classic Literature sequels: Atlas Shrugged 2: One Hour Later

Economics is politics by other means

"What is the end-game of the people who count, the ultra-wealthy who pull all the significant strings behind the scene?"  

That's the ONLY relevant question...and that ONLY can lead to some answer to this insanity that goes on and will go on...actually it just started.
Until we have answer on this question I assume there will be more and more protests around EU and the World (I wonder what Americans are waiting for?") And we'll see violence Middle East style everywhere... They are not going to go down quietly...I feel sorry for generation of our children...


Science without religion is lame, religion without science is blind...Albert Einstein

Makes you long for the days when the Ottomans used the Parthenon to store gunpowder so it got accidentally blown up...

Economics is politics by other means

Actually it's just the opposite. Oligarchs don't care a bit about "mobile" stuff. Real wealth wears out and have to be replaced and labour employed.
Land and rents are there forever. That is valuable that does not need nailing. Water, islands, real estate, roads, energy etc.

I was going to put that here.. you beat me...
Brilliant atrios as always.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

Greece has a foreign primary deficit and a structural import dependency on food and fuel.

Or, in simpler terms: No hard currency, no dinner. So the Troika has leverage over them.

- Jake

Friends come and go. Enemies accumulate.

(Not helping, Germany took over after Italy's own colonisation effort failed, if I remember that history right.)

_{*Lunatic*, n.
One whose delusions are out of fashion.}

I'm bound to be the cynic here, but isn't the standard route still viable: centre-'left' governments brings austerity through parliament, then disintegrates, then in snap elections the false dichotomy believing part of the population elects the centre-right, which reinforces the 'reforms'? (Which doesn't mean that the economic meltdown won't bring them down later, too.)

_{*Lunatic*, n.
One whose delusions are out of fashion.}

A revolt of the back benchers might be the best path forward for the possibility of a Greek Socialist Party that is more than Socialist In Name Only, especially if they refuse to accept draconian demands. The conservatives presided over the bulk of the creation of this problem, if I understand correctly. Let also them then take a big drink from the poisoned chalice of false solutions.

"It is not necessary to have hope in order to persevere."

  It's a treat to have your contribution from the center of this storm.

   When you write further on the outrageous-ness of it all, keep in mind that, in English, hair curls, while blood boils or, as you may have intended, "curdles".  Perhaps though, in this set of circumstances, we need a new image.  

    A little more than seventy-one years ago, Franklin Roosevelt spoke to the American people to explain to them the common-sense urgency of their understanding that, faced with the threat of Hitler's regime, the U.S. had no better course than to give every possible aid to the defence of Britain, since, if Britain fell, the U.S. would find themselves before a far greater danger.

   It is high time that thinking people in the middle class and upper-middle class, including, especially, the middle ranks and upper middle ranks of multinational management recognize that their own heads will eventually be on the block if they fail to make common cause with those far lower in the pecking order.

    The kind of tyranny that Hitler would have subjected the world to is now being put in place by a remorseless cartel of financial and other corporate power interests.  If they aren't stopped and reversed, there is no area of civil society that will not be ravaged for their benefit.

 

 

  Press Conference on "Lend-Lease", December 17, 1940 (excerpts):

    "That would be on the general theory that it may still prove true that the best defense of Great Britain is the best defense of the United States, and therefore that these materials would be more useful to the defense of the United States if they were used in Great Britain, than if they were kept in storage here.

    "Now, what I am trying to do is to eliminate the dollar sign. That is something brand new in the thoughts of practically everybody in this room, I think--get rid of the silly, foolish old dollar sign.

    "Well, let me give you an illustration: Suppose my neighbor's home catches fire, and I have a length of garden hose four or five hundred feet away. If he can take my garden hose and connect it up with his hydrant, I may help him to put out his fire. Now, what do I do? I don't say to him before that operation, "Neighbor, my garden hose cost me $15; you have to pay me $15 for it." What is the transaction that goes on? I don't want $15--I want my garden hose back after the fire is over." ...

 

 

  Roosevelt, in his fire-side chat, "Arsenal of Democracy Speech, December 29, 1940 (excerpts) :

   "Never before since Jamestown and Plymouth Rock has our American civilization been in such danger as now.

   "For, on September 27, 1940, by an agreement signed in Berlin, three powerful nations, two in Europe and one in Asia, joined themselves together in the threat that if the United States interfered with or blocked the expansion program of these three nations-a program aimed at world control-they would unite in ultimate action against the United States.

    "The Nazi masters of Germany have made it clear that they intend not only to dominate all life and thought in their own country, but also to enslave the whole of Europe, and then to use the resources of Europe to dominate the rest of the world.

   "Three weeks ago their leader stated, "There are two worlds that stand opposed to each other." Then in defiant reply to his opponents, he said this: "Others are correct when they say: `With this world we cannot ever reconcile ourselves.' . . . I can beat any other power in the world." So said the leader of the Nazis.

    "In other words, the Axis not merely admits but proclaims that there can be no ultimate peace between their philosophy of government and our philosophy of government.

   "In view of the nature of this undeniable threat, it can be asserted, properly and categorically, that the United States has no right or reason to encourage talk of peace until the day shall come when there is a clear intention on the part of the aggressor nations to abandon all thought of dominating or conquering the world.

    "At this moment, the forces of the states that are leagued against all peoples who live in freedom are being held away from our shores. The Germans and Italians are being blocked on the other side of the Atlantic by the British, and by the Greeks, and by thousands of soldiers and sailors who were able to escape from subjugated countries. The Japanese are being engaged in Asia by the Chinese in another great defense."

   ...

 

 

     If we expect important help from today's president, Barack Obama, we're simply deluding ourselves and counting on help that will never come--not from a man who has failed so far and so terribly to understand the current situation.  He is too much a product of the system that is destroying civil society sector by sector, nation by nation, region by region.


"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

Government agrees to more labor market reforms as part of deal with troika

Employers will be able to offer young people monthly salaries of less than 600 euros as part of labor market reforms that the government has agreed with the European Union and the International Monetary Fund, according to sources.

This was demanded by the troika. Along with other things (that I'll write about as soon as possible) that will make your blood curl (and should, Greece is a testing ground for the rest of the EU, run by fiscal Mengeles)...

Irish Times: Trichet calls for EU finance ministry (June 3, 2011)

First, the context:

Mr Trichet's proposals - carefully phrased as hypothetical ideas - came in a speech in Aachen yesterday where he was awarded the prestigious Karlspreis for services to European unity.

That would be the Charlemagne price, for the German-impaired. So, what vision does Trichet have for the future of the EU?

"Would it go too far if we envisaged . . . giving euro area authorities a much deeper and authoritative, say in the formation of the country's economic policies if these go harmfully astray?" asked Mr Trichet, suggesting "a direct influence, well over and above the reinforced surveillance that is presently envisaged?"

Yes, actually, that would go too far.

In Mr Trichet's view, this EU finance ministry need not administer a budget but monitor directly fiscal and competitiveness policies. This ministry could ensure closer integration of financial services across the EU and sit on boards of international financial institutions.

Of course not, an EU budget could actually be put to useful use. Much better to have the authority to go in and impose austerity directly by overruling the parliament.

ECB chief economist Jürgen Stark, in an interview with Italy's Il Sore 24 Ore, repeated the suggestion of external budgetary intervention. "If countries in difficulty do not introduce the necessary adjustment measures, then interfering in their national policy could be a necessary way of ensuring the correct functioning of monetary union," said Mr Stark.

Little Mengeles, setting up the position of Economic Mengele in Chief.

Economics is politics by other means